US hiring slowed in August, yet Americans' outlook brightens

WASHINGTON (AP) - U.S. employers slowed their hiring in August after two blockbuster months and barely raised their workers' pay, a pullback that may lead the Federal Reserve to leave interest rates alone until late this year.

However, several surveys suggest Americans are growing more optimistic about the job market, a trend that could boost spending and energize the economy in coming months.

Employers added 151,000 jobs in August, a modest gain after an increase of 275,000 in July, the most in eight months, and 271,000 in June. The unemployment rate remained at 4.9 percent for a third straight month, the Labor Department reported Friday.

Federal Reserve Chair Janet Yellen and other Fed officials highlighted the economy's improvement at a conference last month. Vice Chair Stanley Fischer suggested the job market was close to full health, an assessment that typically might prompt a rate hike.

Yet the August job figures may lead the Fed to hold off at its next meeting, Sept. 20-21, and await further economic data. Investors foresee only a 21 percent chance of a rate increase this month, according to futures markets, down from 24 percent on Thursday.

The Fed held its benchmark short-term rate at a record low near zero for seven years to support the economy after the financial crisis erupted in 2008. Its policymakers raised their key rate modestly in December but have stood pat since. Lower rates can encourage more borrowing and spending and thereby stimulate the economy.

Stock investors seemed pleased Friday's modest jobs data might have lessened the likelihood of a September Fed rate increase. Higher borrowing rates tend to weigh down stock prices. The Dow Jones industrial average closed up about 73 points.

If a relatively tepid pace of hiring keeps the Fed on the sidelines, the continuation of ultra-low rates could sustain growth, some analysts suggested.

"This is a healthy thing if the (job) gains slow down a little bit, because that reduces the risk that the Fed will quickly raise rates and choke off the expansion," said Josh Wright, chief economist at iCIMS, a recruitment software company and former Fed staffer.

Still, modest hiring means it could take longer to fully heal the scars of the Great Recession. The proportion of Americans who are either working or looking for work has been flat for about two years but is still near a 40-year low.

The nation's 4.9 percent unemployment rate also remains low. A broader barometer, which counts not only the officially unemployed but also part-time workers who want full-time work and people who have given up their job hunts, is 9.7 percent. That's down from a peak of 17.4 percent in 2009, just after the recession ended.